The Relationship Between Internal Controls and Corporate Governance in Commercial Banks in Kenya

Abstract

The study sought to establish the relationship between internal control and corporate governance in commercial banks in Kenya. Within commercial banks of Kenya; there could be many problems such as unreasonable equity structure, enterprise internal and external supervision vacancy, “inside control” phenomenon, ineffectiveness of board of directors and board of supervisors the above factors result in many problems in enterprises internal control. In order to promote the rapid development of commercial banks in Kenya through internal control perfection, it is important to study internal controls based on corporate governance. This study also highlight the importance of internal controls as a bedrock of corporate governance based on which various organizations can review their policies to revamp their internal control systems in order to achieve good corporate governance. In practice, Internal Control and Corporate Governance are basic assurance systems to maintain the systems efficiency and to protect corporate from failure. The study adopted a descriptive research design in investigating the relationship between internal controls and governance in commercial banks in Kenya. The researcher conducted a survey of all the 45 commercial banks in Kenya and because they are not many, all were considered for the study. The primary data was collected by use of a structured questionnaire and an unstructured interview guide. Data was analysed on the basis of descriptive statistics and performance comparison done across time between the years 2009-2011. From the study it was concluded that most of the banks had incorporated the various parameters which are used for gauging internal controls and the corporate governance as was indicated by the means which were obtained enquiring on the same and this showed that the respondents agreed that their banks had instituted good corporate governance with a strong system of internal controls and there is a relationship between internal control and corporate governance.